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Chinese Stocks Fall on Property Plan

By

Myra P. Saefong And

Barbara Kollmeyer

May 31, 2010 5:18 p.m. ET

Shares fell sharply in Shanghai on Monday as investors moved away from property companies after China's State Council said it has approved a plan to gradually revamp the country's real-estate tax system.

In SHANGHAI, China's benchmark stock index, the Shanghai Composite, dropped 2.4% to 2592.15. The State Council said Monday that it has approved a plan by the National Development and Reform Commission, the nation's economic planning agency, to shake up the real-estate tax system.

In recent months, local media have been full of speculation on what changes the government might implement. Possibilities range from a tax that is based on the property's market value, to expanding the scope of an existing real-estate tax that is levied according to the original purchase price.

Based on the wording of the government's statement Monday, the commission is proposing to revise an existing real-estate tax, which is currently levied on commercial property but could be extended to include homes.

Local media have reported Shanghai could be the first city to impose a real-estate tax on certain homeowners, but some investors predict the official launch could take years.

Other analysts also said it is natural for the stock market to correct following the Shanghai market's rebound last week and the U.S. market's sharp losses Friday.

In SYDNEY, the S&P/ASX 200 slipped 0.6% to 4429.67.
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surged 5% after it said it had received two new bids valuing the company at 1.84 billion Australian dollars (US$1.55 billion), or A$5.80 a share, as the battle for the Australian hospitals group intensified.

In SEOUL, South Korea's Kospi climbed 1.1% to 1641.25. Telecom stocks and auto makers led the benchmark index higher. Ssangyong Motor surged 15% after the company said Friday that seven companies had joined the race to acquire it, submitting separate letters of intent to deal adviser Macquarie Securities Korea.

Hynix Semiconductor fell 2.1%. The world's second-largest maker of computer memory chips by revenue said Monday that it raised its 2010 capital-expenditure budget to as much as 3.05 trillion Korean won ($2.54 billion) from its initial budget of 2.3 trillion won. On Friday, Hynix announced that it had decided to end its joint-venture partnership with Numonyx by buying back all of Numonyx's21% stake for $423 million.Hong Kong's Hang Seng Index fell fractionally, slipping 1.52 points to 19765.19, leaving it down more than 6% for the month. Taiwan's Taiex gained 1.1% to 7373.98. India's Sensitive Index gained 0.5% to 16944.63.

In Europe, most indexes rose. The Stoxx Europe 600 gained 0.4% to 244.97, led by auto makers and technology-sector firms, but ended May 6.8% lower, marking its worst month since February 2009. The U.K. market was closed for a holiday.

In FRANKFURT, the German DAX added 0.3% to 5964.33. Shares of Mercedes-Benz maker Daimler rose 1.7% and shares of business-software giant SAP climbed 1.5%. The weaker euro that has resulted from the debt burdens of countries in southern Europe has helped the competitiveness of German exporters. Still, the German market has fallen for two consecutive months and four of the last five.

In MADRID, Spain's Ibex 35 shed 0.7% to 9359.40. Fitch Ratings cut Spain's sovereign-debt rating to double-A-plus from triple-A after markets in Europe closed on Friday. Dominique Barbet, senior economist with BNP Paribas, said the market "has reacted relatively calmly" to the news, although it did push down shares of Spanish banks.

All of Spain's most heavily weighted stocks were weaker on Monday, led by Banco Santander, down 0.9%, andBanco Bilbao Vizcaya Argentaria, down 1.2%.

Shares of Sacyr-Vallehermoso were among the few gainers in Spain, rising 6.3% after the Spanish builder said it is in talks to refinance debt of its Vallehermoso Division Promocion SAU unit. Sacyr said it has reached agreement with lenders on the main parts of the plan, but hasn't yet come to a final agreement.

In PARIS, the CAC-40 index edged down 0.2% to 3507.56, marking an 8.1% loss for the month, its biggest percentage decline since February 2009.

France's budget minister, Francois Baroin, told French television station Canal Plus on Sunday that keeping the country's own triple-A credit rating "is an objective that is a stretch." He said that to keep the rating, the country has to carry out planned cuts in spending and cut its deficit.

Chinese Stocks Fall on Property Plan

Shares fell sharply in Shanghai on Monday as investors moved away from property companies after China's State Council said it has approved a plan to gradually revamp the country's real-estate tax system.